Montreal-based Hopper is expanding its product offering as demand for its travel booking services hits record highs. The big boss of the online travel agency realizes, however, that the current craze is unsustainable.
Posted at 5:00 a.m.
“It’s crazy right now,” says Hopper founder and CEO Frédéric Lalonde. “Every week is a record. »
People want to travel after two years of the pandemic, and it shows across the industry.
Hopper has doubled his income for six months, says Frédéric Lalonde. “Booking has just recorded its best quarter since its founding in 1997 and eDreams, the European Expedia, has just announced its best results in 10 years”, he adds.
“At the moment, we don’t feel that the economic context could dampen the enthusiasm of travellers. But it is absolutely certain that in the coming year, there will be a slowdown,” believes Frédéric Lalonde.
“It is impossible that what is happening at the moment is supported, because it is two years without travelling, it is the realization that the government can prevent us from traveling, which no one would have thought possible. But it’s also because governments have given huge amounts of money to consumers during the pandemic. People accumulated little debt on their credit cards, so it created a supercycle, an abnormal wave. »
Rising interest rates make mortgages and other debt more expensive, stock market volatility puts pressure on retirement savings, and inflation inflates the value of consumer goods.
“There’s probably a recession coming. It can’t go on like this,” says Frédéric Lalonde, speaking of the demand for flight, hotel and rental vehicle reservations.
Fuel demand and costs combined with limited capacity are putting pressure on airline ticket prices and hotel and rental car rates. That’s why, according to Hopper, the price of travel this summer is skyrocketing from previous years.
Management adds that high prices, frequent delays and continued uncertainty are exacerbating consumer anxiety, and that Hopper-designed financial products are alleviating that anxiety.
Hopper has been testing a few new financial products since the start of the year and is now ready to officially launch them.
Frédéric Lalonde’s favorite novelty is the “leave for any reason” product. This product allows you to check out at or after check-in and to book a room in a new hotel of the same star category at no additional cost.
“You can arrive at the hotel and realize that there is a jackhammer next to your room,” says Frédéric Lalonde. Dissatisfaction can also be linked to the housekeeping which is not up to standard, or simply to the fact that the customer expected to have a view of the sea.
We are the only ones on the planet to offer this.
Offering a product like this is easy, by the CEO’s own admission. Not losing money by offering it is another thing. “It’s difficult,” he admits, explaining that the cost is calculated dynamically.
“When someone books a room at the Ritz-Carlton and decides they don’t want to go there, we have to pay in full for the new booking. There is no risk taken by the supplier [hôtel ou transporteur aérien]. You have to be extremely good at calculating risk. »
With each transaction, algorithms calculate at what price to sell the product based on the risk. If a customer buys a plane ticket with connecting insurance and a hurricane is known to be on the way, the price will go up.
In general, Frédéric Lalonde estimates that the cost always fluctuates between 6 and 15% of the price of the travel product purchased. “If you buy a plane ticket for $100, it will cost an average of $6 to $15. »
In a context where demand is “exploding” and “everything is full everywhere”, the CEO has difficulty hiding his enthusiasm for the success and potential popularity of this new product.
Cancellation and freezing
Hopper now offers the ability – already available for flights – to instantly cancel a stay, for any reason, if you haven’t already checked-in, and get the cost of the room refunded free of charge.
Another new feature, products that freeze flight prices are now available for car rentals for a period of up to 21 days. If the cost goes up, Hopper pays the difference up to $100, and if the cost goes down, the customer pays the lower price.
“It’s important because it means it’s possible to freeze a price for just about anything that’s available in Hopper’s app,” says Frédéric Lalonde.
Hopper also quickly realized that there are many reasons to book directly with their airline or hotel chain, if only because of loyalty programs.
Hopper’s financial products are therefore now offered to users, regardless of where they book.
If you book directly through Air Canada or any carrier, you can now add flexibility products that were previously only available if you were a Hopper customer.
“We would like everyone to buy on our platform, but the reality is that this is not how the industry works. Being able to add these financial products to any reservation allows us to cross a new frontier. »
Hopper, who was worth an estimated $5 billion just six months ago, does not disclose his earnings. The CEO, however, maintains that they are now 30 times higher than they were in 2019 before the pandemic, in particular due to the addition of the various financial products developed.
The gross value of bookings on Hopper this year is expected to be between 4 and 5 billion US.
Hopper counts Investissement Québec, the Caisse de depot et placement du Québec, OMERS (the Ontario Municipal Employees Retirement Fund), Brookfield and Inovia among its investors.
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Record after record for Hopper and the travel industry